The IPO gravy train

SPECIAL FEATURE

Though records were broken and returns robust, there were plenty of ups and downs in the 2006 IPO market.

The IPO market of 2006 was like a roller-coaster ride but records were broken all the same.

Consider this: the 70-odd IPOs listed this calendar year have been the highest since 1997. And with Rs 13,656 crore raised through this route till November this year, unsurpassed in the past, the primary market appears to be firing on all guns.

The strike rate for investors has been decent too. While 63 per cent of the shares listed this year are trading at a premium to their issue price, 94 per cent of these have also yielded significant listing gains.

At least ten companies, eight of them listed before September are trading at a premium of over 100 per cent of their issue price. The pick of the pack was Atlanta Ltd, which has current gains at a whopping 740 per cent. And there was a lot for the flippers too"�60 per cent of the top ten gainers registered listing gains of over 50 per cent.

Meltdown blues
Of the top 20 stocks in terms of the extent of subscription, 17 were issued before the stock market hit a rough patch beginning in May through June.

By August, however, investors were back in the market with Tech Mahindra getting the most attention, and an over-subscription of a phenomenal 70 times! Retail investors also came back"�since August with the exception of GMR Infrastructure, the retail portion of the top ten performers was oversubscribed at least four times.

The year ended on mixed notes with the high profile Cairn energy(India) getting a bland response.

New sectors
There were some interesting companies to make their IPOs. These include companies from the internet (Info edge), helicopter charter (Global Vectra) and FM radio (Entertainment Network) arena.

"The response to Info Edge indicates a readiness to accept the dot-com business models," says Tarun Sisodia, director, Anand Rathi Securities.

In fact, Info Edge was over-subscribed nearly 55 times. Of course, the real estate sector stands out in terms of the number of issues as well as stock price appreciation.

The recent response to the Sobha Developers IPO tells a larger tale in itself. The high profile Parsvnath Developers was over-subscribed 56 times and is trading at a 54 per cent premium.

The infrastructure segment also proved a decent bet. GMR Infrastructure trades at a 68 per cent premium to its IPO price. GVK Power and Unity Infraprojects are two exceptions, trading at a discount to the IPO price.

Engineering gains
The lustre to 2006 was also added by engineering stocks, most trading at robust premia. The start to the good run was provided by Punj Lloyd which was listed in January.

The issue was trading at a premium of 44 per cent as on December 15. Sadbhav Engineering too performed well with current gains at nearly 140 per cent.

The tech and media story
Technology continued to be a decent performer with three of the top ten gainers being related to the IT field. The star performer is Tech Mahindra, which is trading at a 350 per cent premium on Friday.

"Positive future prospects, attractive IPO pricing and generally robust sectoral trends make Tech Mahindra my IPO of the year," says Janesh Shah, head of research, Networth Stock Broking.

Educomp and Tulip IT are two other stunning performers in the tech pack at 480 per cent and 295 per cent respectively.

There was good news from the media and entertainment segment as well. Out of the six such players that debuted on the secondary market in 2006, only one namely Prime Focus proved a losing investment. The Southern biggie, Sun TV remained the best performer returning 51 per cent over its issue price. 
 

YOU GAIN SOME...
Company	Listing  date	Issue  Price  (Rs)	Price  on Dec 15  (Rs)	Listing  Price  (Rs)	Current  returns (%)	Listing  returns  (%)
Atlanta	Sep 25	150	1259.55	192.3	740	28
Educomp Solutions	Jan 13	125	725.45	285.35	480	128
Tulip IT Services	Jan 05	120	473.9	182.55	295	52
Tech Mahindra	Aug 28	365	1127.65	552.79	209	51
GMR Infrastucture	Aug 21	210	353.45	210.3	68	0
Parsvnath Developers	Nov 30	300	461.05	526.29	54	75
Gujarat State Petronet	Feb 16	27	40.7	40.29	51	49
Sun TV	Apr 24	875	1323	1466.05	51	68
Punj Lloyd	Jan 06	700	1010.75	1057.8	44	51
M&M Financial	Mar 17	200	245	233	23	17
Reliance Petroleum	May 11	60	63.95	85.45	7	42
Lanco Infratech	Nov 27	240	245	241.4	2	1
Note:Current returns indicate  percentage change in stock price as on 15 december over issue price Note:Listing gains indicate percentage change in closing price on listing day over issue price The table includes not only the top 4 gainers but also some high profile stocks which did not do as well.

Same old story...
If you are nostalgic about good old textiles, food processing and paper then you would have turned out a loser in all probability during 2006. While all debutants in the textile space are trading at a discount. Two of the three paper makers are also below issue price. 
 

...AND LOSE SOME
Company	Listing  date	Issue  Price  (Rs)	Price on Dec 15  (Rs)	Listing  Price  (Rs)	Current  returns (%)	Listing  returns  (%)
Sree Sakthi Paper	Feb 16	30	11	29.2	-63	-3
Uttam Sugar Mills	Apr 10	340	135.1	417.35	-60	-23
Visa Steel	Mar 17	57	27.5	57.15	-52	0
Powersoft Global	Apr 28	22	10.9	21.1	-51	-4
Dynemic Products	Feb 23	35	19.3	28.2	-45	-19
JHS Svendgaard Labs	Oct 21	58	31.7	57.05	-45	-2
Nitin Spinners	Feb 02	21	12	26.2	-43	-25
Celebrity Fashions	Jan 12	180	105	229.65	-42	-28
Richa Knits	Oct 12	30	18.1	30.25	-41	-1
Deccan Aviation	Jun 12	148	132.6	98.85	-10	-33
The table includes not only those who lost the most but also some high profile stocks which didn't per form too well.

Size does matter
Of the ten largest IPOs issued this year, nine are trading at a premium, with five of them returning over 50 per cent of their issue price.

The largest IPO, Reliance Petroleum, currently trades 7 per cent higher than its issue price. Deccan Aviation was the veritable black sheep among the top ten companies, registering losses on listing, and continues to trade at a discount.

With all its twists and turns however, 2006 did turn out to be a good year for the IPO market. For 2007 too, the line-up of probable IPOs remains long, with the likes of Idea Cellular, Global Broadcasting News (IBN), and even DLF.